
NCLT held that non-compliance with the CIRP framework and procedural irregularities rendered the Resolution Plan unfit for approval.
The National Company Law Tribunal (NCLT), New Delhi Bench, comprising Judicial Member Mr. Ashok Kumar Bhardwaj and Technical Member Mr. Subrata Kumar Dash, rejected the Resolution Plan, holding that strict adherence to the CIRP framework is mandatory. Any deviation, including the inclusion of unapproved applicants after the final EoI list, non-disclosure of material facts by the Resolution Professional (RP), or failure to conduct proper financial due diligence, renders the plan non-compliant and unfit for approval under the Insolvency and Bankruptcy Code (IBC).
The National Company Law Tribunal (NCLT) adjudicated upon IA-875/2021 and IA-2205/2021 in the insolvency resolution process of M/s Trading Engineers International Ltd. IA-875/2021, filed by the erstwhile Resolution Professional (RP), Mr. Vivek Raheja, sought approval of the Resolution Plan, while IA-2205/2021, filed by Mr. Anil Kumar Tyagi, challenged the legitimacy of the plan. The Tribunal, after extensive hearings, directed physical appearances to address concerns regarding the eligibility of the Corporate Debtor (CD) for exemptions under Section 29A of the Insolvency and Bankruptcy Code, 2016, the qualifications of the Successful Resolution Applicant (SRA), and the impact of the order issued by the Insolvency and Bankruptcy Board of India (IBBI) suspending the erstwhile RP.
During the proceedings, the Tribunal noted procedural irregularities in the submission and approval of the Resolution Plan. Originally, the Expression of Interest (EoI) was submitted by Conquerent Control Systems Private Limited, however, after the issuance of the final list of Prospective Resolution Applicants (PRAs), three individuals—Mr. Sushant Chabbra, Mr. Ram Babu Gupta, and Mr. Pramod Gupta—were permitted to join the plan despite not independently submitting EoIs. The Tribunal identified this as a procedural lapse, raising concerns over transparency and adherence to the regulatory framework governing the Corporate Insolvency Resolution Process (CIRP). Further scrutiny revealed that the erstwhile RP, Mr. Raheja, had allowed the submission of a Resolution Plan by a director of the CD under the false pretence of MSME classification, even though the CD was not recognized as an MSME at the initiation of CIRP.
The IBBI, through its order dated 12.01.2024, suspended Mr. Raheja for failing to disclose material facts regarding the eligibility of the SRA and for inadequately assessing the financial standing of the joint resolution applicants. The newly appointed RP, Mr. Vivek Parthi, highlighted that Mr. Chabbra’s net worth of Rs. 9.09 crore primarily comprised illiquid assets, rendering his financial capability questionable. Additionally, Mr. Raheja had entered into lease agreements concerning the CD’s assets without obtaining approval from the Committee of Creditors (CoC), violating Section 28 of the IBC. The IBBI further noted that while serving as the RP for Unitech Machines Ltd., Mr. Raheja had initiated an avoidance application against Mr. Chabbra, but he failed to disclose this fact when Mr. Chabbra was considered as a co-resolution applicant for the present CD, thereby suppressing material information from the CoC.
The Disciplinary Committee (DC) conducted a detailed examination of the CD’s classification as an MSME and directed verification of supporting documents by the regulatory board. It was observed that Mr. Raheja failed to ascertain the applicability of certain financial exemptions due to the unavailability of relevant data from the CD’s directors. Despite this, he allowed the submission of a Resolution Plan involving Mr. Chabbra without proper financial due diligence. The DC found that Mr. Raheja had suppressed material facts, including Mr. Chabbra’s financial liabilities and involvement in another CIRP, and failed to assess the actual source of funds for the proposed Resolution Plan, which required an infusion of Rs. 11.87 crores. A review of Mr. Chabbra’s net worth certificate revealed that his assets were significantly tied up in group companies, including Unitech Machines Ltd., which was undergoing CIRP.
The DC concluded that Mr. Raheja had violated multiple provisions of the IBC and CIRP Regulations by (i) suppressing material facts from the CoC, (ii) failing to conduct a proper financial evaluation of Mr. Chabbra, (iii) disposing of the CD’s assets without requisite CoC approval, and (iv) executing a lease agreement in contravention of CIRP regulations. Consequently, the DC imposed a two-year suspension on Mr. Raheja’s registration as an Insolvency Professional. The order was set to take effect within 30 days, with copies circulated to relevant authorities, including the NCLT and stakeholders’ committees of corporate debtors where Mr. Raheja was previously engaged.
In light of these findings, the NCLT concluded that the Resolution Plan did not conform to the legal requirements and suffered from multiple deficiencies. The Tribunal emphasized that only PRAs listed in the final EoI could submit Resolution Plans and that any deviation from this structured process would undermine the integrity of the CIRP. As the final list of PRAs was prepared following a strict regulatory framework, the Tribunal held that the Resolution Plan, having failed to comply with procedural and financial due diligence requirements, could not be approved. Accordingly, the Tribunal rejected the Resolution Plan, underscoring the necessity for strict adherence to CIRP regulations and transparency in the insolvency resolution process.
Mr. Sumit Bindal, Advocate represented the Applicant.
Mr. Karan Gandhi, Mr. Sikhar Tiwari and Mr. Vivek Parthi, Advocates appeared for the Resolution Professional.
Mr. Prashant Methab and Mr. Rauhav Marwaha, Advocates appeared for the Successful Resolution Applicant.
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